Answer to Question #165105 in Economics for Bryan Abdul Malik

Question #165105

Consider the following structural model

C₁= a_o+ a₁Y₁

I₁=b_o+b₁Y₁+b₂Y_1-4

Y₁=C₁+I₁+G₁

Find the reduced form of the model, C and Y

Expert's answer

"Y=\\frac {b_0-4+a_0+G_1}{1-b_1-b_2-a_1}"

"C=a_0+a_1\\times \\frac {b_0-4+a_0+G_1}{1-b_1-b_2-a_1}"

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